Jin Ya Technology Financial Fraud Case Studies

The Chinese economy and securities markets have been increasingly improved in recent years,the number of the listed companies is already over 3000.The listed companies want to enter the capital market through an initial public offering in order to replenish funds for the corporate,however,the quantity of the listed companies have not been improved accordingly as the number of listed companies increases.The listed companies in the capital markets have conducted more financial frauds,which is harmful to the vital interests of the general public.The quality of the business is related to the interests of a large number of stakeholders,especially the quality of the listed companies since they are directly making financing in the stock markets.Therefore,the authenticity and reliability of their financials are extremely important.It is obvious that the harmfulness of financial frauds because the exposure of financial fraud of some listed companies happening previously caused a huge loss to a great number of investors.Financial frauds are not only harmful to investors and creditors but also to the order of the capital markets.Preventive measures and suggestions can be put forward by studying the typical cases of financial frauds in the real capital markets and analyzing the reasons and purposes behind,which is of great significance of the sound development of the capital markets.A typical case of financial fraud is how Sichuan Jinya Technology Company got listed by conducting financial frauds.In October 2009,Jinya Technology(300028.SZ)got listed in Chinese GEM market through an IPO,became the latest listed company in the communication industry,and had lots of “good” performance.However,the so-called impressive performance was later found to be financial frauds.The prepayment of the construction contracts,inflated revenue and net income,and tampered financial reporting data gave the investors a seemingly satisfactory but false financial statement.We can combine the Triangle theory of financial frauds,GONE theory,and Risk Factor theory to analyze the motivation,opportunity,and excuse of Jinya Technology in order to know the motivations of the financial fraud of Jinya Technology from the perspectives of the internal management of the corporate and external supervision of community.The analysis of the financial fraud of Jinya Technology is mainly based on the Triangle theory and Risk Factor theory of financial frauds.The second half of the proposed measures and suggestions are put forward based on the analysis of the motivation and reasons of the IPO of Jinya Technology accordingly.The specific practices are mainly based on the internal and external aspects of the enterprise: from the internal aspect,the internal organizational structure should be improved in order to restrict the power,the effectiveness of internal supervision and internal control should be improved,in order to reduce the incidence of financial frauds from the internal aspects of the enterprise.The most important thing from the external aspect of the enterprise is to improve the laws and regulations,to maintain the independentaudit status of certified public accountants,to issue the audit reports fairly,to improve the professional ethics of financial practitioners,and to make good use of social media.